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Cramer's TheStreet.com Charged With Accounting Fraud

Tyler Durden's picture




 

Over two years ago, while scouring through TheStreet.com's filing we stumbled upon something interesting: "As a result of the need for the Company and its independent registered public accounting firm to focus attention on matters related to the Company's previously-announced review of the accounting in its former Promotions.com subsidiary, which subsidiary the Company sold in December 2009 -- including matters related to the preparation and filing by the Company in February 2010 of a Form 10-K/A for the year ended December 31, 2008, a Form 10-Q/A for the quarter ended March 31, 2009 and Forms 10-Q for the quarters ended June 30, 2009 and September 30, 2009, respectively, and matters related to an investigation commenced by Securities and Exchange Commission in March 2010 -- the Company requires additional time  to prepare its financial statements, assess its internal controls and file its Form 10-K for the year ended December 31, 2009 ("2009 Form 10-K")." Oops. We can't wait to see how Mr. Cramer will explain to the Mad Money faithful this particular twist on the hangover of the show's five year birthday bash. Also, we wonder if CNBC will finally cancel the ludicrous Jim "truth" Cramer campaign once this news breaks. We doubt it- in the quest for evaporating eyeballs, all is fair." This was in April 2010. Today, we got resolution on the matter, as the SEC finally has put the matter to close.

From the SEC:

SEC Charges Financial Media Company and Executives Involved in Accounting Fraud

Washington, D.C., Dec. 18, 2012 — The Securities and Exchange Commission today charged a digital financial media company and three executives for their roles in an accounting fraud that artificially inflated company revenues and misstated operating income to investors.

Additional Materials

The SEC alleges that TheStreet Inc., which operates the website TheStreet.com, filed false financial reports throughout 2008 by reporting revenue from fraudulent transactions at a subsidiary it had acquired the previous year.  The co-presidents of the subsidiary – Gregg Alwine and David Barnett – entered into sham transactions with friendly counterparties that had little or no economic substance.  They also fabricated and backdated contracts and other documents to facilitate the fraudulent accounting.  Barnett is additionally charged with misleading TheStreet’s auditor to believe that the subsidiary had performed services to earn revenue on a specific transaction when in fact it did not perform the services.  The SEC also alleges that TheStreet’s former chief financial officer Eric Ashman caused the company to report revenue before it had been earned.  

The three executives agreed to pay financial penalties and accept officer-and-director bars to settle the SEC’s charges.

“Alwine and Barnett used crooked tactics, Ashman ignored basic accounting rules, and TheStreet failed to put controls in place to spot the wrongdoing,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “The SEC will continue to root out accounting fraud and punish the executives responsible.”

According to the SEC’s complaints filed in federal court in Manhattan, the subsidiary acquired by TheStreet specializes in online promotions such as sweepstakes.  After the acquisition, TheStreet failed to implement a system of internal controls at the subsidiary, which enabled the accounting fraud. 

The SEC alleges that through the actions of Ashman, Alwine, and Barnett, TheStreet:

  • Improperly recognized revenue based on sham transactions.
  • Used the percentage-of-completion method of revenue recognition without meeting fundamental prerequisites to do so, including reliably estimating and documenting progress toward the completion of relevant contracts.
  • Prematurely recognized revenue when the subsidiary had not performed actual work and therefore had not really earned the revenue. 

According to the SEC’s complaint, when the subsidiary’s financial results were consolidated with TheStreet’s financial results for financial reporting purposes, the improper revenue on the subsidiary’s books resulted in material misstatements in the company’s quarterly and annual reports for fiscal year 2008.  On Feb. 8, 2010, TheStreet restated its 2008 Form 10-K and disclosed a number of improprieties related to revenue recognition at its subsidiary, including transactions that lacked economic substance, internal control deficiencies, and improper accounting for certain contracts. 

Ashman agreed to pay a $125,000 penalty and reimburse TheStreet $34,240.40 under the clawback provision (Section 304) of the Sarbanes-Oxley Act, and he will be barred from acting as a director or officer of a public company for three years.  Barnett and Alwine agreed to pay penalties of $130,000 and $120,000 respectively, and to be barred from serving as officers or directors of a public company for 10 years.  Without admitting or denying the allegations, the three executives and TheStreet agreed to be permanently enjoined from future violations of the federal securities laws. 

The SEC’s investigation was conducted by Senior Counsel Maureen P. King and Staff Accountant Nandy Celamy of the New York Regional Office.  Aaron Arnzen served as Senior Trial Counsel in the matter. 

* * *

How totally shocking...

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Tue, 12/18/2012 - 14:44 | 3075412 dadichris
dadichris's picture

I just enrolled in a new course at Wharton - "Pathways to corporate profits - the complete guide to accounting fraud"

Tue, 12/18/2012 - 14:47 | 3075421 WSP
WSP's picture

WHY would CNBC cancel this criminals show when the entire CNBC operation is nothing more than a propaganda outlet for the criminal Federal Reserve, criminal banksters, and by extension, all of the complicit criminals who support the corrupt, socialist USSA system?  Seriously?  Accounting fraud is encouraged in the new USSA!

Tue, 12/18/2012 - 14:48 | 3075428 ebworthen
ebworthen's picture

Another guppy catch with the little net while the Great White sharks and Giant Squid roam free.

 

Tue, 12/18/2012 - 14:51 | 3075435 glenlloyd
glenlloyd's picture

should surprise no one

Tue, 12/18/2012 - 15:08 | 3075451 Dr. Engali
Dr. Engali's picture

I'm sure CNBS is all over this story.....Too bad Cramer wasn't charged.He should be charged with more than accounting fraud. He should be spending time with Corzine getting gang raped at the local penitentiary. 

Tue, 12/18/2012 - 14:58 | 3075462 Miss Expectations
Miss Expectations's picture

It's rather touching how agreeable these criminals are...

"Barnett and Alwine agreed to pay penalties of $130,000 and $120,000 respectively, and to be barred from serving as officers or directors of a public company for 10 years."

 

PS...The whole thing kind of sounds like money laundering to me.

Tue, 12/18/2012 - 14:58 | 3075463 caimen garou
caimen garou's picture

all these market pumpers should be thrown in jail with cell mate named bubba and leroy. all they are doing is trying to push people into stocks, not buying it msm pumps! how about pushing your bs to the population on planet dreamit!

Tue, 12/18/2012 - 14:58 | 3075465 muppet_master
muppet_master's picture

spx @ 1447 = TOP !!!!

SELL !!! its now @ 1444 = SELL !!!!

gold sell-off is your sell-off indicator...same thing when QE3 gold @ $1750 and spx @ 1474...GOLD SOLD OFF FIRST !!!

Tue, 12/18/2012 - 15:01 | 3075474 Buzz Fuzzel
Buzz Fuzzel's picture

I'm shocked I tell you shocked.  How could this possibly be.

Tue, 12/18/2012 - 15:07 | 3075488 muppet_master
muppet_master's picture

but, but

he's a demon-rat HYPOCRITE democrat !!! he pays his "taxes" (political contributions) to them..how could they do this to him?? how could odummer do this to him??

just like buffet and his tax deductions on his planes...the IRS gave him a bill for like $25mm?? LOL !!!!!!!!!

hypocritic demon-rats !!! ROFLMAO !!!!!

Tue, 12/18/2012 - 15:04 | 3075480 muppet_master
muppet_master's picture

who listens to that crank-a-holic??

sometimes i do..but can't stand him for more than 5 minutes..i used him as a CONTRARIAN INDICATOR

NFLX @ $300 he says BUY!!! = me short

SLV @ $45 in 4-2011, he says BUY !!! = me short

AAPL @ $628 he says: to $1000 makes "arithmetic sense" = me short...then it tanks to $540 = cover shorts..

aapl @ $700, i posted here on ZH "TOP"...shorted..now @ $540 or so, after deadcat bounce....@ sub $425 will sell deep in the money puts and after another pop to maybe $490-$500 will buy back those puts and STILL KEEP MY $700 AAPL SHORTS...wash, rinse, repeat

also the crank SHOE SHINE BOY told you on 11-11-11 to buy gold @ $1800..now @ $1674...LOL !!!!!!!! ROFLMAO !!!!!!!!!!!!!

Tue, 12/18/2012 - 15:06 | 3075486 roadhazard
roadhazard's picture

How  many daze left until housing comes back, Jimbo, you moron.

 

Is Cramer too big to fail? 

Tue, 12/18/2012 - 15:10 | 3075499 muppet_master
muppet_master's picture

"getting back to EVEN" he says

so  he RODE all the way down from djia 13k to 6.6k on march 2009 ??? LOL !!!!! too funny !!!

while he was "breaking even" others were doubling their freaking money !!!

Tue, 12/18/2012 - 15:13 | 3075516 muppet_master
muppet_master's picture

the crank's response to the SEC:

"YOUR NUTS, YOUR NUTS, YOU KNOW NOTHING" !!

stupid shoe shine boy..= contrarian indicator...(see post above, regarding aapl, nflx and slv) he says buy = me short..

he's one of my many proprietary shoe shine boys contrarian indicators...however i don't spend an hour listening to that freak..otherwise i would loose my hearing.

Tue, 12/18/2012 - 15:15 | 3075526 MillionDollarBoner_
MillionDollarBoner_'s picture

"Andrew M. Calamari, Director of the SEC’s New York Regional Office."

AKA The Squid.

GS is everywhere !;O)

Sat, 12/22/2012 - 22:10 | 3090620 MeelionDollerBogus
MeelionDollerBogus's picture

it's like the Taliban and a terrorist named "al Talibani" and in Iraq Bush mentioned one named "al Iraqi" - just kabuki theater

what's next, al Million Dollar Bonus?

Tue, 12/18/2012 - 15:19 | 3075531 muppet_master
muppet_master's picture

i don't watch cnbc...

i rather watch cartoon network with tom & jerry...

but i hope cnbc does not cancell that crank-aholic shoe shine boy-contrarian indicator's "show"

i want to see his stupid crying face when spx is @ sub 300 and gold @ sub $350....i want to see his "explanation" to his stupid folllwing = widows n orphans...who don't know anything about the ponzi sheme...

 i spend maybe 5-10 minutes/week "listening" to the shoe boy...i listen to them near market turns and do the OPPOSITE of what he says.

Tue, 12/18/2012 - 15:21 | 3075547 Bansters-in-my-...
Bansters-in-my- feces's picture

Hey....!!! Look over there...!!!

Tue, 12/18/2012 - 15:25 | 3075574 Bansters-in-my-...
Bansters-in-my- feces's picture

To any SEC members reading this(and I know yous do) hows that silver fraud and manipulation investigation going...????

 

Ps....fuck yous,ya dog and pony show.....literally.

Tue, 12/18/2012 - 15:27 | 3075586 naiverealist
naiverealist's picture

"Without admitting or denying the allegations, the three executives and TheStreet agreed to be permanently enjoined from future violations of the federal securities laws."

 

Is this saying that the execs and TheStreet are forbidden from violating future securities laws.  Without this, would they be permitted to violate future securities laws? 

 

What gives?

Tue, 12/18/2012 - 15:38 | 3075635 yogibear
yogibear's picture

LOL, the real Cramer. Criminals Inc. 

CNBC going to show one of their own as a con artist?

Guess who's running the show? The same crimnals that caused the housing bubble. Nobody goes to jail so it's off to bigger and better schemes.

 

Tue, 12/18/2012 - 15:41 | 3075653 yogibear
yogibear's picture

Corzine is like Cramer, laughing all the way to the bank. The criminals are running the show.

Tue, 12/18/2012 - 15:51 | 3075699 Seasmoke
Seasmoke's picture

Quick, get Stacey Keech on the phone.

Tue, 12/18/2012 - 16:26 | 3075861 Supernova Born
Supernova Born's picture

Cramer will talk. He believes he can bullshit all of the people, all the time.

Tue, 12/18/2012 - 16:25 | 3075872 Ned Zeppelin
Ned Zeppelin's picture

"Andrew M. Calamari, Director of the SEC’s New York Regional Office" - how fitting. Where the Squid lives.

Tue, 12/18/2012 - 16:30 | 3075889 PAWNMAN
PAWNMAN's picture

This guy, Kudlow and Blodget are 3 of the biggest criminals! Should all be behind bars, instead of T.V. Only in America!!!

Tue, 12/18/2012 - 16:38 | 3075924 Squid Vicious
Squid Vicious's picture

Jim seems like the kind of guy i'd like to have a few beers with... then piss them on him after my bladder is full...

Tue, 12/18/2012 - 18:23 | 3076355 Quantum Nucleonics
Quantum Nucleonics's picture

Come on Tyler, you're turning an ant hill into Mt. Pinatubo.  So Cramer, et al, bought a company that was using sham accounting to swindle a buyer to pay a higher price.  Gee, that never happens!  Autonomy, cough, cough.  It would be fair to say Cramer is a tool for getting swindled on the deal, but that hardly makes him the next Jeff Skilling.  (God, I can't believe I just defended Jim Cramer!)  This sort of guilt by association is one more example of the complete incompetence of the SEC.  So, if my moron cousin Jimmy marries a hooker, the whole family is then guilty of prostitution?

Wed, 12/19/2012 - 00:52 | 3077625 unununium
unununium's picture

Jim Cramer is fond of saying

ACCOUNTING IRREGULARITIES = SELL !

Wed, 12/19/2012 - 03:42 | 3077760 nastaking
nastaking's picture

Oppo's Cubot C8 Smart Phone 5 is one of the first smartphones to come with a full HD 1080p display

Wed, 12/19/2012 - 04:39 | 3077784 StychoKiller
StychoKiller's picture

I'm beginning to think that there are ZERO corp's that have any honesty left in their financial statements! (Could it be that FRNs, worth around $85/Ton have NO VALUE???)

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